EU Protectionism Passed Off as Environmentalism

Europe is facing the twin challenge of trying to get economic growth back on track while being a good steward of the environment. These goals are not necessarily in conflict with each other—unless of course the protectionists get in the way. The European Commission in June adopted regulations about the international trade of green energy technologies that might trigger a global trade war that would harm the economy and the environment in the process.

The “Renewable Energy Directive” pushes the European Union to generate increasing amounts of energy from green, renewable sources, including biofuels. A good idea in principle. But European biofuel producers—fearful of increased competition from the U.S. and Asia—succeeded in pressuring Brussels to restrict imports of biofuels from abroad. The Commission wants to impose onerous production standards on Asian and Western Hemisphere biofuels that wouldn’t apply to European producers. What’s more, a coalition that includes European biofuel producers and NGOs are pushing the EU to use the so-called Indirect Land Use Change policies to further discriminate against U.S. biofuels. Indirect Land Use Change is a fundamentally flawed concept whereby European government bureaucrats would seek to punish biofuel producers—in this case American—for the supposed indirect impact that their production has on land use and food prices in the developing world. The problem is that this is virtually impossible to calculate accurately and objectively, which leaves too much room for protectionist tinkering with the numbers.

Biofuel producers, particularly in Germany, also complain that large American agribusinesses are “dumping” subsidized biofuels on the market. No doubt U.S. producers enjoy generous government handouts—but so do their German competitors. Moreover, Europe’s consumers would certainly benefit from access to cheaper clean energy sources precisely when their economy needs a boost. While German producers might chafe at the competition from America, Europe’s automobile drivers and manufacturers who rely on biofuels as a key power source would be the beneficiaries.

Meanwhile, Europe’s biofuel producers have argued also for limiting Asian imports. Asian producers can’t be accused of dumping, so instead European producers argue that their fuels aren’t environmentally friendly. Their claims are amplified by NGOs such as Greenpeace and Friends of the Earth. But these allegations don’t stand up to scrutiny.

Most of Europe’s biofuel comes from rapeseed while most American biofuel comes from soybeans and corn. Biofuel made from these sources provide two to three times the amount of usable energy required to produce it. In contrast, most Asian biofuel comes from palm oil, which generates as much as ten times the amount of energy required for its own production. As a result, palm oil uses significantly less land to generate the same amount of usable energy. This leaves more land for the generation of food and other products while satisfying growing demand for renewable energy.

The environmental NGOs who decry the Asian biofuels actually oppose all forms of biofuel because they fear it may lead to a reduction of rainforests. This argument is seriously flawed, however. For example, Malaysia restricts its palm oil production to 20% of the land which is allocated for agricultural purposes. Sixty percent of Malaysia’s territory is reserved for forest (the average in Europe is 25%). The NGOs prefer wind and solar as energy feedstock. But given the EU’s pressing economic needs right now, it is foolish to think that the continent’s economy can be powered by wind and solar in the near future. As such, biofuels—from both Europe and abroad —must play an important role in the energy mix.

Meanwhile, Europe’s biofuel producers cynically echo the arguments made by the NGOs knowing that while European regulators won’t limit the growth of Europe’s biofuel production, they might well be counted on to block imports. The real reason for their effort to block Asian imports is plain old protectionism masked as environmentalism.

And it’s not that Europe’s biofuel producers are struggling. They enjoy a strong competitive position in their home market. EU biodiesel production accounts for 78% of the biofuels consumed in the EU, according to the European Biodiesel Board. Europe is also a major player on the global stage, responsible for 65% of the world’s biodiesel production. At a time, though, when European producers are under pressure from the economic downturn, it is understandable they would look to Brussels for help.

Let’s hope far-sighted policymakers will resist the siren call of protectionism and defend free-trade in biofuels and other goods. Protectionism in the 1930s turned a bad situation into a disaster. Let’s not repeat that mistake.

Mr. Della Vedova is a member of the Italian Chamber of Deputies and aformer member of the European Parliament.

Source : Wall Street Journal by Della Vedova

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